Jim Summersett, center, regional CEO of Prime Healthcare, cuts a ribbon last November signifying its ownership of Monroe Hospital in Bloomington, Ind. Prime Healthcare is seeking to take over six California hospitals.
Kat Carlton
The Associated Press

Jim Summersett, center, regional CEO of Prime Healthcare, cuts a ribbon last November signifying its ownership of Monroe Hospital in Bloomington, Ind. Prime Healthcare is seeking to take over six California hospitals.
Kat Carlton
The Associated Press

Sale of struggling hospitals will be good for patients

As public hearings made clear this month, there is overwhelming support for the sale of the six struggling California hospitals in the Daughters of Charity Health System to Prime Healthcare.

The hearings in Los Angeles and the Bay Area are leading up to a decision in coming weeks by Attorney General Kamala Harris about whether the proposed sale is in the public interest. Saving six hospitals from bankruptcy is in the public interest.

Unfortunately, labor unions backing separate bids are driving much of the public debate, which appears to have less to do with the well-being of patients and communities than their own self-interests in improving contracts or organizing more workers.

Lost in the rhetoric and finger-pointing is good evidence to suggest that converting failing nonprofit hospitals to for-profit status may be just the right prescription for the six hospitals and the patients they serve.

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The hospitals are Seton Medical Center in Daly City, Seton Coastside in Moss Beach, O’Connor Hospital in San Jose, Saint Louise Regional Hospital in Gilroy, St. Vincent Medical Center in Los Angeles and St. Francis Medical Center in Lynwood.

According to a recent report in The Journal of the American Medical Association, not-for-profit hospitals that convert to for-profit status share three primary characteristics: They tend to be small to medium size (less than 400 beds), are not affiliated with teaching institutions, and face extremely challenging financial problems posed by low reimbursements and higher levels of charity care.

In the case of the Daughters of Charity, its hospitals are losing $10 million a month, and the entire chain risks bankruptcy or closure without a sale.

The JAMA report focused on a study by Harvard University researchers, which looked at 237 not-for-profit conversions in the U.S. between 2003 and 2010 and the changes that resulted from them. In part, the study tested public concerns, similar to those being advanced by opponents of the proposed sale, that for-profit hospitals may focus more on boosting margins at the expense of quality care and serving disadvantaged patients.

As reported by JAMA, the study found that these for-profit conversions resulted in better financial health for the hospitals, but no decrease in care provided to disadvantaged patients, no reduction in quality of care and no increase in patient deaths. Cost-cutting measures and more patients with private insurance drove most of the financial improvements, the study found. After conversions, there were no differences in trends regarding Medicare patients, Medicaid patients or care for the poor. Specifically, there was “no evidence that the improvements came through avoiding care for poor patients,” the authors wrote.

Ontario-based Prime Healthcare has made a business of acquiring and saving struggling hospitals – 29 of them in the U.S., including 15 in California. None of the hospitals they have acquired have been sold or closed, and the company cites quality care metrics that have earned accolades from several reviewing agencies.

In selecting Prime Healthcare, Daughters’ CEO Robert Issai said that it met all of the criteria set by his board of directors, including two imperatives: Sustain the Daughters’ mission of care in the community – a mission built over 150 years – and protect the jobs and pensions of thousands of active and non-active union and non-union employees. The Prime bid includes guarantees to support those imperatives, as well as to make capital investments and sustain charity care in ways that successful for-profits have a wide capacity to do.

In the end, the attorney general must decide whether this for-profit conversion is in the “public interest.” The evidence suggests that it will be. The well-being of patients and the communities these hospitals serve may depend on it.

S. Daniel Higgins is a Daughters of Charity Health System board member and former emergency department physician.